Tuesday, February 14, 2012

Bank bonuses aren't what they used to be

Bonuses and pay increases for staff at foreign banks here are lower this year - which is not surprising given that most have reported a fall in their 2011 profits.

The picture for those working in local banks could be mixed.

DBS, which last Friday reported record earnings of $3.04 billion, the highest ever for a local bank, will not be paying record bonuses, said chief executive Piyush Gupta. 'The best year was 2006, as it was for other banks,' he noted.

DBS' return on equity (ROE) in 2006 was 12.8 per cent. ROE for 2011 was 11 per cent.

Still, pay for staff rose sharply last year over 2010, up 20 per cent to $1.7 billion as headcount gained 11 per cent to 17,652. This works out to each employee earning an average of $96,986 from $89,733 in 2010.

As DBS staffers started learning of their bonus payouts yesterday, one said that her total payout was the best she had ever got. But she conceded that this may not be the case for others whose basic pay may be relatively higher.

It is uncertain if OCBC Bank and United Overseas Bank - which will be reporting their full-year results later this month - will maintain bonuses at 2010 levels. For the first nine months of 2011, operating profits at the two local banks were slightly down.

The lead could come from US banks like Citi, JP Morgan and Goldman Sachs, and European banks such as Credit Suisse and Deutsche Bank which have already announced their 2011 results.

Still, despite reduced bonuses for their Asian staff, including those here, it is believed that on average, the reduction is less severe than the 30-70 per cent cuts reported for staff in New York, London or Geneva. Zero bonuses are also not uncommon.

Confirming the downtrend, Andre Cheong, chief executive, Global Search Partners, said: 'Typically, foreign banks pay their bonuses around February while local banks pay theirs in March. For the coming bonus payments, both foreign and local banks are expecting a decrease in the amounts this year.'

'In one foreign bank, employees have been informally told that they can expect 25 to 30 per cent less in bonuses this year,' he added.

Concurring, James Rushworth, managing director of Profile Asia, said: 'Bonuses are definitely down for many, some are getting none, even though their appraisals have been strong.'

Some bankers at foreign banks, however, told The Business Times that the expectations of their employees have been 'managed' and that unhappiness with the smaller payouts are not obvious. Some are also said to be relieved to still have their jobs.

'The sense of entitlement is being adjusted,' said one executive of a US bank.

A source at another bank said that bonuses at his bank have been slashed by 10-30 per cent on average. 'The point to note is that bonuses have to reflect the current economic environment, while it is as much a recognition and reward of the work done in the past year. Hence, overall bonuses have come down,' he added.

The exception seems to be Malaysian banks which have practically no exposure to the Western economies. It seems bonuses of four to six months could be the minimum this year at Maybank and CIMB - this is still unlikely to match previous record bonuses.

Global Search Partner's Mr Cheong said 'one candidate (in the middle office) we spoke to recently is expecting about six months' bonus.'

'The front-office people and good performers can probably expect more, but I'm not sure if it will be as much as 12 to 36 months as in the past.'

Foreign banks still pay more than local banks. 'The gap will have narrowed for sure but there is still a gap,' said Mr Rushworth.

Hiring has slowed except in private banking but even there the premium has dropped.

'Candidates hopefully should be more realistic and know that clients don't always follow them,' said Richard Wee, chief executive of private bank Lombard Odier, Singapore. 'What's being offered is less than before, around a 20-30 per cent premium.'

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